Market Tracker trend report: Voting results - the 2020 AGM season

Market Tracker trend report: Voting results - the 2020 AGM season

Background and scope

This Market Tracker update examines shareholder voting patterns at the annual general meetings (AGMs) of FTSE 350 companies during the 2020 AGM season, using data from the 2019 AGM season for comparative purposes. For inclusion in the report, companies must be listed on the FTSE 350 at the date of the end of their financial year.

We looked a total of 284 companies (94 FTSE 100 companies and 190 FTSE 250 companies) with a financial year end from 1 April 2019 to 31 March 2020, which, for the purposes of this report has been defined as the ‘2020 AGM season’. Our data set for the voting research includes real estate investment companies but excludes closed-end investment companies due to their different structure and the inconsistent impact it would have on our statistical findings.

Data for this report has been sourced from the Market Tracker transaction data analysis tool which allows users to access, analyse and compare the specific features of corporate transactions. This is an update to the voting section of our AGM Season 2019 Trend Report, which examined the market practice and trends emerging from the FTSE 350 AGM season 2019.

The percentages included in this report have been rounded up or down to whole numbers, as appropriate.

AGM voting results - highlights

  • Slight increase in the number of companies experiencing failed resolutions in the 2020 AGM season (4%) compared to the 2019 AGM season (3%)
  • Significant opposition to resolutions continued to decline slightly to around 22% of companies reviewed (2019: 24%, 2018: 25%)
  • Withdrawn resolutions hit a record high, boosted by 13% of companies reviewed cancelling their final dividend payments
  • Executive pay the most hotly contested resolution, accounting for 33% of all failed resolutions and 41% of resolutions that carried significant no votes
  • Marginal increase in opposition to director re-election resolutions, with 34% of proposed resolutions attracting significant dissent (2019: 33%)
  • In line with the requirements of the UKCG Code 2018 and the FRC's 2018 Guidance on Board Effectiveness, most companies are addressing significant shareholder dissent within their results, with some providing an extended statement at a later date 

Impact of the coronavirus pandemic on the 2020 AGM season

Public companies are generally required to hold an AGM within six months of the financial year end, so for a large number of the companies we reviewed, the timing and format of the AGM was affected by the compulsory measures prohibiting public gatherings that came into effect in response to the coronavirus pandemic. Any company that would have been required to hold a meeting from 26 March 2020 onward has been permitted to postpone the date of its meeting under the extension first set out in the Corporate Insolvency and Governance Act 2020 and the further extension under the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020, SI 2020/1031, although our research indicated that only a small percentage of companies actually opted to postpone the AGM to a later date.

Companies were also afforded flexibility in relation to meeting format. The research found that most companies opted for restricted attendance at their AGM, with companies making arrangements to ensure the meeting was quorate and encouraging shareholders to vote by proxy. Unsurprisingly, concerns have been raised in relation to the negative impact this may have on shareholder engagement.

Voting participation during coronavirus pandemic

We took a sample of voting results from FTSE 100 companies that held an AGM after the restrictions came into effect and compared the total number of votes cast as a percentage of issued share capital (ISC) with the previous year. Our research revealed no immediately discernible trend. More than half of the companies we looked at had similar participation levels to the previous year, with less than 5% variance in the total number of votes cast as a percentage of ISC. While a few companies, for example Royal Dutch Shell plc, British Land Company, and Polymetal stood out for a decrease of between 10-15% in participation, at the other end of the scale Whitbread plc saw the percentage of votes cast increase by over 20% in comparison to 2019. However further research revealed that both Polymetal and Whitbread had experienced similar variance in relation to previous AGMs.

For a more detailed account of the impact of the coronavirus pandemic on the 2020 AGM season, see our Coronavirus (COVID-19)—AGM tracker and Corporate news analysis: Coronavirus (COVID-19)—impact on the AGMs of FTSE 350 and AIM 50 companies (1 March 2020–31 May 2020).

Failed resolutions

The number of companies experiencing a failed resolution at the AGM crept up slightly in the 2020 AGM season. Our research found that of the 284 AGMs within our scope, 10 (4%) had at least one failed resolution. There were 12 failed resolutions in total (two resolutions were voted down at the AGMs for both BHP Group plc and Shaftesbury plc). This compares with 12 failed resolutions across nine companies (3%) in 2019 and 13 failed resolutions across 10 companies in 2018.

The resolution voted down most frequently was the directors’ remuneration report, which attracted over 67% of the vote against it at the Tesco plc and Capital & Counties Properties plc AGMs, 64% against at the Playtech plc AGM and 52% against at the Wizz Air Holdings plc AGM. This contrasts with the 2019 AGM season, which saw only one remuneration report voted down. The findings this year have more in common with the results in 2018, where three of the failed resolutions were in connection with the directors’ remuneration report and one was in relation to the remuneration policy. Conversely, opposition to the disapplication of pre-emption rights, which accounted for 38% of failed resolutions in 2018, and 17% of failed resolutions in 2019, only accounted for 8% of failed resolutions in the 2020 AGM season.

Significant no votes

Of the 284 companies’ voting results that were reviewed, 56 companies had one or more resolutions at the AGM that passed but attracted over 20% shareholder opposition, a threshold that is confirmed by the Investment Association (IA)’s public register of shareholder dissent and the UKCG Code 2018 (Provision 4)  as ‘significant’ for the purposes of reporting shareholder opposition to resolutions. If we include failed resolutions within our definition of significant no votes, 63 companies (22.2%) recorded significant no votes against one or more of the proposed resolutions at the AGM. This shows a small yet sustained decrease from our findings in previous AGM seasons, which peaked at 25% in 2018 (24% in 2019).

In total, we saw 103 individual resolutions attracting significant dissent. This is a decrease of 12% on the 2019 season, which saw 117 resolutions with significant no votes from shareholders. If we remove resolutions relating to directors’ remuneration from our data, which made up 40% of all resolutions attracting significant dissent, the decline is more pronounced, accounting for 62 failed resolutions in the 2020 AGM season compared to 82 failed resolutions in 2019. Allowing for the increased scrutiny of executive compensation amid turbulent economic conditions, the decline this year may be attributable in part to shareholders allowing companies more leeway considering the challenging conditions created by the coronavirus pandemic.

Significant no votes

Echoing our findings from last year, sorting the companies into FTSE 100 and FTSE 250 shows that a higher proportion of FTSE 250 companies than FTSE 100 companies received dissenting votes against resolutions, although there was evidence that this gap is closing. Overall, 21% of the FTSE 250 companies we reviewed received significant opposition to one or more resolutions at their AGM (a decrease from 27% last year). This compared to 17% of FTSE 100 companies (a decrease from 18% last year).

When looking at the representation of significant dissenting votes for resolutions that passed across industry sectors, companies in the Travel, Hospitality, Leisure & Tourism (8), Construction (6), Media & Telecommunications (6) and Investment (6) sectors experienced the highest number of significant ‘no’ votes (with the companies in each of those sectors experiencing significant opposition to one or more resolution at the AGM).

Shareholder backlash against executive remuneration

Directors’ remuneration has been a point of contention for shareholders in recent years. With fears of a post-pandemic recession looming, shareholders have subjected company spending to scrutiny, with a continued focus on executive pay.

Executive remuneration was the resolution most likely to be voted against, accounting for 41 of all the significant no votes (40%). This breaks down to 26 against the remuneration report and 15 against the remuneration policy. Four of the 26 resolutions attracting opposition against the remuneration report failed at the AGM. The data shows a progressive increase in the past few years. In 2019, 30 resolutions passed with significant dissent against the remuneration report and four passed with dissent against the remuneration policy, making up 29% of all resolutions attracting significant dissent. This compares to 21% in 2018. While the conditions created by the global pandemic have impacted shareholder attitudes to executive pay, the dramatic increase in dissenting votes against the remuneration policy may also be attributable to the fact that a greater number of companies put their remuneration policies forward for shareholder approval in the 2020 AGM season.

Director election and re-election

As in previous years, director election and re-election also remained a key area of dissent for shareholders, with 25 companies reporting one or more significant no votes against the directors up for election and/or re-election. In total, there were 35 individual votes (34%) attracting significant dissent in relation to director election/re-election. The data indicates a marginal increase in shareholder opposition to directors in comparison to the 2019 AGM season (33%).

Withdrawn resolutions

Withdrawn resolutions were a key trend in the 2020 AGM season, with 50 companies (18%) withdrawing at least one resolution prior to the AGM taking place. A total of 60 resolutions were withdrawn, a significant increase from the 11 withdrawn resolutions in 2019. It is notable that 38 of the resolutions were withdrawn prior to AGMs held in April and May. 

Withdrawn resolutions

In addition to the shareholder focus on remuneration, companies have tightened their purse strings in relation to shareholder payouts and unsurprisingly, 62% of the withdrawn resolutions related to the payment of a final dividend. The data identified very little correlation between opposition to the remuneration report or remuneration policy and the cancellation of the final dividend payment, with the two only coinciding at the AGMs of Lloyds Banking Group plc and Crest Nicholson Holdings plc.

A significant and unusual development took place at the TI Fluid Systems AGM on 14 May 2020, where the company put forward a dividend payment of 5.94 euro cents per share despite the company recording a revenue loss of 16% and being forced to furlough workers and make salary cuts across the board in response to the pandemic. The resolution was voted down by 57.3% of shareholders.

Public disclosures – shareholder dissent

In December 2017, the IA launched its public register of significant votes of 20% or more against any resolution at an AGM or general meeting of a company in the FTSE All-Share index. The register includes a description of the resolution, the result of the shareholder vote, a link to the AGM results announcement (including any statement the company has made under Provision 4 of the UKCG Code 2018, or Provision E.2.2 of the 2016 UKCG Code) and a link to any further statement the company has made on the actions they have taken since the vote. The public register aims to focus attention on those companies who have received significant shareholder dissent and to track whether and how they are addressing those concerns.

The large majority of companies that experienced significant shareholder dissent at the AGM against one or more resolutions have provided a statement acknowledging this in their results, for example Informa PLC included the following within the announcement of the voting results:

‘The Board is pleased that shareholders voted in support of all the resolutions at today's AGM, noting a minority of shareholders voted against one resolution, Resolution 13. The Board intends to address the questions raised through a planned consultation.’

In addition to the public register, the UKCG Code 2018, at Provision 4, requires that ‘when 20 per cent or more of votes have been cast against the board recommendation for a resolution, the company should explain, when announcing voting results, what actions it intends to take to consult shareholders in order to understand the reasons behind the result…’ (this provision partly replicates Provision E.2.2 of the UKCG Code 2016). In line with this, several companies have published an additional announcement on the same day the results are released. For example, JD Sports published an announcement immediately after its AGM on 31 July, which stated:

‘All resolutions have been passed with the requisite majority. However, the Board recognises the votes against the remuneration related resolutions at this year's AGM.
The Board and the Remuneration Committee are particularly disappointed with the level of opposition to the remuneration report, remuneration policy and new Executive Director LTIP proposed at this year's AGM especially since it has invested considerable time and resource into improving its remuneration structures this year. Members of the Board and the Remuneration Committee have also spent a significant amount of time during the course of the year engaging with its shareholders both during the process of preparing the remuneration report and policy and in the run up to the AGM.
The Remuneration Committee engaged PwC during the course of the year specifically to assist with the preparation of a new remuneration policy and to devise a new Executive LTIP structure. The Committee worked alongside PwC on this project, which sought to carry out relevant benchmarking exercises and implement new aspects of Executive Director remuneration in order to provide greater alignment between Executive pay and shareholder interests.
The Company intends to continue its engagement with as many shareholders as possible throughout the course of the year to continue this progress.’

The UKCG Code 2018, which came into effect for companies with financial years starting on or after 1 January 2019, further requires companies to give an update on the views received from shareholders and actions taken, which should be published no later than six months after the shareholder meeting. A good example of this is the AGM update released by Informa on its website:

‘The Company notes the outcome of voting on Resolution 13 at the 2019 AGM, relating to the Remuneration Policy, which received majority support (64.9%) from shareholders. This Remuneration Policy was the existing Policy which was last consulted on in 2017. Following the significant disruption caused by COVID-19, the Board sought support from shareholders to have the option to extend its existing policy for a year to avoid policy distraction whilst the Board and Management Team focused on the immediate response to COVID-19 and, in particular, building stability and security through 2021 and beyond. The Board was pleased to receive this majority support.
Informa maintains a regular dialogue with investors, including an Annual Shareholder Roadshow led by the Chairman, and having spoken to a number of shareholders both before the AGM and afterwards, it is clear that the minority vote against the Policy extension was almost exclusively due to the absence of an update on amending existing Executive Director post-employment shareholding commitments and contractual pension entitlements.
The current Remuneration Policy is clear on these matters, in respect of all future Executive Director appointments. However, for the existing Executive Directors, the Board always intended to agree a set of amendments, but as these would require a change to existing legal contractual agreements, this required more time and coincided with the Chairman succession process.
As confirmed within Informa’s recent Half-Year Results, the Chairman succession process, which was previously well progressed, has now resumed.
Following the AGM vote, and recognizing the views of a minority of shareholders on the above two specific matters, the Remuneration Committee has now reached an agreement with the two existing Executive Directors and can now confirm the Group will meet the timetable and guidance on both, post-employment shareholding requirements and amending pension entitlements.
The Board is confident that providing this commitment will address the concerns of the minority of shareholders who raised the above issues.
The Board looks forward to continued engagement with its shareholders on this and any other matters.’

In addition to the measures above, the Pensions & Investment Consultants Limited (PIRC) states in its UK Shareowner Voting Guidelines that companies should disclose in their annual reports steps taken to engage with shareowners on the substantive concerns represented by any ‘significant’ no votes. Bank of Georgia included the following statement in its annual report in response to the significant minority vote against the company’s remuneration report:

‘The Remuneration Committee recognises that at the 2019 AGM the majority of the shareholders who voted supported the resolution to receive and approve the Directors’ Remuneration Report (74%), but nonetheless a significant minority opposed this advisory resolution. Early in 2019, the Company and members of the Remuneration Committee engaged with shareholders and shareholder advisory groups regarding remuneration arrangements, including the remuneration package for the Executive Director; and our major shareholders were generally supportive. We continued to engage with shareholders after the AGM to further understand their views on this matter, noting that the foregoing resolution relates to its implementation of the previous Directors’ Remuneration Policy. Lastly, further to the AGM and shareholder engagement, in September 2019 the Company issued a statement on our website, which can be seen at https:// information/meetings. We confirmed to shareholders that there will be no increase in cash salary, the number of deferred salary shares, nor in the maximum bonus opportunity, over the three years from the date of the 2019 AGM for the current Executive Director.’

Further reading

For more detail on the topics in this trend report, the following news stories from our Corporate law blog may be of interest:

FRC reviews impact of coronavirus on FTSE 350 AGMs

FirstGroup drives home a significant no vote against CEO

Remuneration questioned by investors at recent AGMs

JD’s lack of sportsmanship leads to significant no votes

‘One off payment’ to crane SIG out of financial minefield

TI Fluid shareholders hit the brakes on final dividend.

Shareholder opposition as pension Pott stands 1 % away from a ‘red top’

Can a company suspend or cancel a dividend in the light of the coronavirus (COVID-19) pandemic?

Price tag on remuneration reports cause for shareholder opposition

Shareholders revolt against Paragon Banking Group and RWS Holdings

Shaftesbury and Britvic face shareholder resistance at 2020 AGM


Related Market Tracker Trend Reports:

AGM Season 2019  

AGM Season 2018  

Dividends 2019

Dividends 2018

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